2020 Annual Shareholders’ Meeting
2. Meeting Agenda 2
(1) Report Items 4
(2) Proposed Resolutions 5
(3) Director Election 7
3. Attachment 8
III. Independent Auditors’ Report and 16
2019 Consolidated Financial Statements IV. Independent Auditors’
Report and
29 2019 Parent Company Only Financial Statements
V. 2019 Earnings Distribution Table 40 VI. Comparison Table for the
Procedures for Lending Funds to
41 Other Parties Before and After Revision
VII. List of Independent Director Candidate 43
4. Appendix 44
II. Articles of Incorporation 49
III. Rules for Election of Directors 60
IV. Shareholdings of All Directors 63
Note:
• Minutes of 2020 Annual Shareholders’ Meeting will be available on
TSMC’s website
(http://www.tsmc.com/english/investorRelations/shareholders_meeting.htm)
within 20 days after the Meeting.
- 1 -
- 2 -
2020 Annual Shareholders’ Meeting
Time 9:00 a.m., June 9, 2020 Place TSMC’s Headquarters
(No. 8, Li-Hsin Road 6, Hsinchu Science Park, Hsinchu,
Taiwan)
(If a change in meeting venue is warranted due to COVID-19 epidemic
prevention reasons, we will make the related public announcements
on TSMC’s website and Market Observation Post System.)
Attendants All shareholders or their proxy holders Chairman Dr.
Mark Liu, Chairman of the Board of Directors 1. Chairman’s Address
2. Report Items:
(1) To report the business of 2019
(2) Audit Committee’s review report
(3) To report 2019 earnings distribution
(4) To report 2019 employees’ profit sharing bonus and directors’
compensation
3. Proposed Resolutions
(1) To accept 2019 Business Report and Financial Statements
(2) To revise the Procedures for Lending Funds to Other Parties 4.
Director Election
To elect one additional Independent Director
Voting by Poll 5. Other Business and Special Motion 6. Meeting
Adjourned
- 4 -
2. Audit Committee’s review report
Explanatory Notes Please refer to Attachment II.
3. To report 2019 earnings distribution
Explanatory Notes
TSMC’s Annual Shareholders’ Meeting approved the amendments to
TSMC’s Articles of Incorporation on June 5, 2019 to authorize the
Board of Directors to approve quarterly cash dividends after the
close of each quarter. The respective amounts and payment dates of
2019 quarterly cash dividends approved by TSMC’s Board of Directors
are demonstrated in the table below:
2019 Approval Date (month/date/year)
Total Amount (NT$)
- 5 -
4. To report 2019 employees’ profit sharing bonus and directors’
compensation
Explanatory Notes
(1) The Board of Directors approved 2019 employees’ profit sharing
bonus
and directors’ compensation on February 11, 2020. The employees’
profit sharing bonus and directors’ compensation are to be
distributed in cash.
(2) 2019 employees’ total amount of cash bonus and profit sharing
bonus is
NT$46,331,490,068, of which NT$23,165,745,034 has been distributed
following each quarter as cash bonus, and NT$23,165,745,034 will be
distributed in July 2020 as profit sharing bonus.
(3) 2019 directors’ compensation is NT$360,404,337.
Proposed Resolutions 1. To accept 2019 Business Report and
Financial Statements
(Proposed by the Board of Directors)
Explanatory Notes
(1) TSMC’s 2019 Financial Statements, including Balance Sheets,
Statements of Comprehensive Income, Statements of Changes in
Equity, and Statements of Cash Flows, were audited by independent
auditors, Ms. Mei Yen Chiang and Mr. Yu Feng Huang, of Deloitte
& Touche.
(2) 2019 Business Report, Independent Auditors’ Report, the
aforementioned
Financial Statements, and Earnings Distribution Table are attached
hereto as Attachments I, III, IV and V.
- 6 -
2. To revise the Procedures for Lending Funds to Other Parties
(Proposed by the Board of Directors)
Explanatory Notes
(1) The R.O.C. Financial Supervisory Commission amended its
“Regulations
Governing Loaning of Funds and Making of Endorsements / Guarantees
by Public Companies”. TSMC’s “Procedures for Lending Funds to Other
Parties” require amendments to reflect such regulatory
changes.
The major amendments are to exempt fund-lending by TSMC’s wholly-
owned offshore subsidiaries to TSMC from the restrictions that
would otherwise limit: (i) the total loan amount to 20% of the net
worth of the lending subsidiaries; and (ii) the term of each loan
to one year.
(2) The Comparison Table for the Procedures for Lending Funds to
Other
Parties Before and After Revision is attached hereto as Attachment
VI.
- 7 -
(Proposed by the Board of Directors)
Explanatory Notes
(1) TSMC’s Articles of Incorporation state that the Company’s Board
of Directors shall have seven to ten directors, of which at least
three must be independent; the Board of Directors is authorized to
determine the number of directors.
TSMC’s Board of Directors is currently consisted of nine directors,
five of whom are independent. The Board of Directors approved to
increase the number of directors to ten and to elect one additional
independent director at TSMC’s 2020 Annual Shareholders’ Meeting.
The term of office of the independent director to be elected shall
expire on the same date as the term of the existing directors (from
June 9, 2020 to June 4, 2021).
(2) TSMC’s directors shall be elected by adopting candidates
nomination system as specified in Article 192-1 of the R.O.C.
Company Law. Shareholders shall elect the independent director from
the List of Independent Director Candidate, whose education and
professional qualifications, experience and relevant information
are attached hereto as Attachment VII.
Voting by Poll Other Business and Special Motion Meeting
Adjourned
- 8 -
Attachment I
Business Report
2019 was a year of continued milestones for TSMC. We delivered a
tenth consecutive year of record revenue even as we faced business
headwinds from trade tensions between countries. Such tensions
created greater uncertainty for our customers and impacted the end
demand for products. Thanks to the strong demand coming to our
industry-leading 7-nanometer (N7) technology, our revenue increased
1.3% year-over-year in US dollar terms in 2019, in contrast to the
global semiconductor industry’s 12% year-over-year decline.
In 2019, we witnessed an acceleration of the deployment of 5G
networks and smartphones in several major markets around the world.
We expect a faster worldwide penetration of 5G smartphones with
higher silicon content over the next several years. The need for
higher power efficiency, speed and more complex functionalities in
5G smartphones will lead to increasing use of TSMC’s leading edge
technologies. Therefore, we raised our 2019 capital spending to
US$14.9 billion in order to meet this increased demand. We will
continue to anticipate the growth that will follow.
We continued to work on the fundamentals of our business in 2019 by
improving our quality systems to provide better service to our
customers, enriching our R&D infrastructures, strengthening our
IT architecture and security, and accelerating our technology
differentiation.
By working consistently to provide the foundry industry’s most
advanced technologies and to make it available to all the product
innovators, TSMC continuously expands the pool of innovators who
fuel the semiconductor industry growth.
In 2019, our N7, in its second year, continued to see strong
adoption across a wide range of products, from mobile, high
performance computing (HPC), Internet of Things (IoT) and
automotive applications. Our new 7-nanometer Plus (N7+) technology
also came to the world’s first high volume production with Extreme
Ultraviolet (EUV) lithography technology. Together, this
7-nanometer family, N7 and N7+, represented 27% of our total wafer
revenue in 2019. Our 6- nanometer (N6) technology just entered risk
production in the first quarter of
- 10 -
2020 and further extends our 7-nanometer family well into the
future.
Our 5-nanometer (N5) technology, with extensive EUV adoption, will
begin volume production in the first half of 2020. As the foundry
industry’s most advanced solution, N5 is further expanding our
customer product portfolio and increase our addressable
markets.
Our 3-nanometer (N3) technology will be another full node stride
from our N5 and offer the foundry industry’s best PPA technology
when it is introduced.
Our proprietary wafer-level packaging solutions of InFO (Integrated
Fan-Out) and CoWoS® (Chip on Wafer on Substrate) continue to see
strong momentum. We are developing 3D chip stacking solutions, such
as SoIC (System on Integrated Chip), to provide system level
solutions for the industry.
Highlights of TSMC’s accomplishments in 2019:
Total wafer shipments were 10.1 million 12-inch equivalent wafers
as compared to 10.8 million 12-inch equivalent wafers in
2018.
Advanced technologies (16-nanometer and beyond) accounted for 50
percent of total wafer revenue, up from 41 percent in 2018.
We deployed 272 distinct process technologies, and manufactured
10,761 products for 499 customers.
TSMC's market share in the total semiconductor foundry segment
increased to 52 percent in 2019 as compared to 51 percent in the
previous year.
2019 Financial Performance
Consolidated revenue reached NT$1,069.99 billion, an increase of
3.7 percent over NT$1,031.47 billion in 2018. Net income was
NT$345.26 billion and diluted earnings per share were NT$13.32.
Both decreased 1.7 percent from the 2018 level of NT$351.13 billion
net income and NT$13.54 diluted EPS.
TSMC generated net income of US$11.18 billion on consolidated
revenue of US$34.63 billion, which decreased 4.0 percent and
increased 1.3 percent respectively from the 2018 level of US$11.64
billion net income and US$34.20
- 11 -
billion consolidated revenue.
Gross profit margin was 46.0 percent compared with 48.3 percent in
2018, while operating profit margin was 34.8 percent compared with
37.2 percent a year earlier. Net profit margin was 32.3 percent, a
decrease of 1.7 percentage points from 2018’s 34.0 percent.
To implement an earlier profit distribution to our shareholders,
TSMC transitioned from annual cash dividend to quarterly cash
dividend in 2019, and further raised its total cash dividend
payments to NT$10.0 per share in 2019 from NT$8.0 a year ago.
Technological Developments
In 2019, we continued to increase our investment in R&D with a
record US$2.96 billion to meet our customer needs and to extend our
technology leadership.
Our N5 reached risk production in 2019 and will begin volume
production in the first half of 2020. N5 is expected to broaden our
customer product portfolio and expand our addressable markets as
customers seek to establish leadership positions for their
products.
In its second year of ramp, N7 received more than 100 customer
product tape-outs by the end of 2019, while N7+ began volume
production with EUV. Our N6 is on track for volume production
before the end of 2020. N6 provides a clear migration path for next
wave N7 products.
Leveraging our leadership at 28-nanometer, our 22ULP (ultra-low
power) and 22ULL (ultra-low leakage) technologies both began volume
production in 2019. 22ULL supports IoT and wearable device
applications while 22ULP supports image processing, digital TVs,
set-top boxes and other consumer products. We also extended our
16-nanometer offerings with 12FFC+ and 16FFC+ in 2019 to support
customer needs in ultra-low-power applications.
TSMC’s advanced packaging solutions enable system integration with
wafer level process, by seamless integration of front end wafer
process and backend chip packaging. In 2019, we offered the 5th
generation InFO solutions with finer
- 12 -
interconnect line width and spacing to enable both mobile and high
performance computing products. TSMC’s CoWoS® continued to
integrate with larger interposer size for heterogeneous
integration. We also are developing TSMC-SoIC®
(System-on-Integrated Chip), an industry-leading 3D chip stacking
solution that enables multiple chips in close proximity to deliver
the best system performance.
TSMC’s ecosystem, Open Innovation Platform® (OIP), empowers our 499
distinct customers to unleash their innovations with fast
time-to-market. In 2019, we continued to add partners to our OIP
Cloud Alliance, which offers our customers to design in a safe and
secure cloud environment. This cloud design environment
significantly increases design productivity. We also worked with
our ecosystem partners to expand our libraries and silicon IP
portfolio to over 26,000 items in 2019. More than 10,600 technology
files and over 360 process design kits, from 0.5-micron to
5-nanometer, are available to customers via TSMC-Online. We saw
more than 100,000 customer downloads in 2019.
Corporate Social Responsibility
At TSMC, we are dedicated to sound corporate governance and pursue
profitable growth. We also commit to the environment, society, and
balancing the interests of all stakeholders. A sound corporate
governance built upon our core values is the foundation of TSMC’s
corporate social responsibility. As an important member of the
global semiconductor industry, we recognize it is our
responsibility to face up to the increasingly challenging global
environment and lead by example.
In 2019, we established the Corporate Social Responsibility
Executive Committee, led by Chairman. The Executive Committee will
work with senior management across many key functions and the
existing CSR committee to set our CSR strategy, and align with UN
Sustainable Development Goals. Our focuses are driving actions on
green manufacturing, creating an inclusive workplace for talent
development, building a responsible supply chain and caring for the
underprivileged. We will work hard to fulfill our role to pursue a
sustainable future.
Honors and Awards
- 13 -
excellence in management from organizations including Forbes,
Fortune Magazine, The Nikkei, CommonWealth Magazine,
PricewaterhouseCoopers, RobecoSAM (S&P Global) and the Taiwan
Stock Exchange. In technology innovations, the Company was ranked
10th in the number of patents applications in the US Patent &
Trademark Office, and ranked 1st in top 100 patent applicants in
Taiwan. In sustainability, we were chosen once again as a component
of the Dow Jones Sustainability Indices, becoming the only
semiconductor company to be selected for 19 consecutive years. TSMC
was also ranked 10th in CorporateKnights 2019 “Global 100 Most
Sustainable Corporations in the World Ranking”. Meanwhile, we
remained a major component in both MSCI ESG and FTSE4Good Emerging
Index. In investor relations, TSMC continued to receive multiple
awards from Institutional Investor Magazine.
Outlook
We believe the significant communication advancement brought by 5G
networks will unlock new usage models across many different types
of connected end devices, and drive exponential growth of data.
Together with the continuous innovations in algorithms, a smarter
and more intelligent society emerges. Digital computation now
becomes increasingly ubiquitous and demands massive computation
power. Therefore we expect the development of 5G-related and HPC
applications will drive strong demand for our advanced technologies
in the next several years. With the most advanced technology and
capacity, and the widest coverage of customers, TSMC is
well-positioned to lead the industry to capture the growth.
Macroeconomic uncertainties over trade tensions between countries
continued in 2020. TSMC will remain agile and work on the
fundamentals of our business and further accelerate our technology
differentiation. We will be everyone’s foundry and treat all
customers equally and fairly. We will fiercely protect our
intellectual property. We will conduct our business with the utmost
integrity and uphold our Trinity of Strengths of technology
leadership, manufacturing excellence and customers’ trust.
TSMC’s dedicated foundry business model, open innovation platform
and our four core values of Integrity, Commitment, Innovation and
Customer Trust, are what enable us to be everyone’s foundry. As we
enter a new digital age, we will continue working closely with IC
innovators around the world to create values and generate good
returns to our shareholders. We are dedicated to sound corporate
governance,
- 14 -
fulfilling our responsibilities as a global corporate citizen and
pursuing a sustainable future. We thank you for your trust and
commitment to TSMC, and look forward to a prosperous future with
our shareholders.
- 15 -
Independent Auditors’ Report (Consolidated Financial
Statements)
The Board of Directors and Shareholders Taiwan Semiconductor
Manufacturing Company Limited Opinion We have audited the
accompanying consolidated financial statements of Taiwan
Semiconductor Manufacturing Company Limited and its subsidiaries
(the “Company”), which comprise the consolidated balance sheets as
of December 31, 2019 and 2018, and the consolidated statements of
comprehensive income, changes in equity and cash flows for the
years then ended, and the notes to the consolidated financial
statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements
present fairly, in all material respects, the consolidated
financial position of the Company as of December 31, 2019 and 2018,
and its consolidated financial performance and its consolidated
cash flows for the years then ended in accordance with the
Regulations Governing the Preparation of Financial Reports by
Securities Issuers and the International Financial Reporting
Standards (IFRS), International Accounting Standards (IAS), IFRIC
Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and
issued into effect by the Financial Supervisory Commission of the
Republic of China. Basis for Opinion We conducted our audits in
accordance with the Regulations Governing Auditing and Attestation
of Financial Statements by Certified Public Accountants and
auditing standards generally accepted in the Republic of China. Our
responsibilities under those standards are further described in the
Auditors’ Responsibilities for the Audit of the Consolidated
Financial Statements section of our report. We are independent of
the Company in accordance with The Norm of Professional Ethics for
Certified Public Accountant of the Republic of China and we have
fulfilled our other ethical responsibilities in accordance with
these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our
opinion.
- 17 -
Key Audit Matters Key audit matters are those matters that, in our
professional judgment, were of most significance in our audit of
the consolidated financial statements for the year ended December
31, 2019. These matters were addressed in the context of our audit
of the consolidated financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on
these matters. Key audit matters for the Company’s consolidated
financial statements for the year ended December 31, 2019 are
stated as follows: Property, plant and equipment (PP&E) –
commencement of depreciation related to PP&E classified as
equipment under installation and construction in progress (EUI/CIP)
Refer to Notes 4, 5 and 14 to the consolidated financial
statements. The Company’s evaluation of when to commence
depreciation of EUI/CIP involves determining when the assets are
available for their intended use. The criteria the Company uses to
determine whether EUI/CIP are available for their intended use
involves subjective judgements and assumptions about the conditions
necessary for the assets to be capable of operating in the intended
manner. Changes in these assumptions could have a significant
impact on when depreciation is recognized. Given the subjectivity
in determining the date to commence depreciation of EUI/CIP,
performing audit procedures to evaluate the reasonableness of the
Company’s judgements and assumptions required a high degree of
auditor judgement. Consequently, the validity of commencement of
depreciation related to PP&E classified as EUI/CIP is
identified as a key audit matter. Our audit procedures related to
the evaluation of when to commence depreciation of EUI/CIP included
the following, among others: 1. We read the Company’s policy and
understand the criteria used to determine
when to commence depreciation. 2. We tested the effectiveness of
the controls over the evaluation of when to
commence depreciation of EUI/CIP. 3. We sampled EUI/CIP at year end
and performed the following for each
selection:
a. Evaluated whether the selection did not meet the criteria
specified by the Company for commencement of depreciation.
b. Observed the assets and evaluated their status at year
end.
- 18 -
4. We sampled and evaluated whether the selection of EUI/CIP met
the criteria specified by the Company for commencement of
depreciation during the year.
5. We sampled and evaluated whether the selection of EUI/CIP met
the criteria
specified by the Company for commencement of depreciation
subsequent to year end.
Other Matter We have also audited the parent company only financial
statements of Taiwan Semiconductor Manufacturing Company Limited as
of and for the years ended December 31, 2019 and 2018 on which we
have issued an unmodified opinion. Responsibilities of Management
and Those Charged with Governance for the Consolidated Financial
Statements Management is responsible for the preparation and fair
presentation of the consolidated financial statements in accordance
with the Regulations Governing the Preparation of Financial Reports
by Securities Issuers and the IFRS, IAS, IFRIC, and SIC endorsed
and issued into effect by the Financial Supervisory Commission of
the Republic of China, and for such internal control as management
determines is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement,
whether due to fraud or error. In preparing the consolidated
financial statements, management is responsible for assessing the
Company’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going
concern basis of accounting unless management either intends to
liquidate the Company or to cease operations, or has no realistic
alternative but to do so. Those charged with governance (including
members of the Audit Committee) are responsible for overseeing the
Company’s financial reporting process. Auditors’ Responsibilities
for the Audit of the Consolidated Financial Statements Our
objectives are to obtain reasonable assurance about whether the
consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditors’ report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with the auditing standards generally
accepted in the Republic of China will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these
consolidated financial
- 19 -
statements. As part of an audit in accordance with the auditing
standards generally accepted in the Republic of China, we exercise
professional judgment and maintain professional skepticism
throughout the audit. We also: 1. Identify and assess the risks of
material misstatement of the consolidated
financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal
control.
2. Obtain an understanding of internal control relevant to the
audit in order to
design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control.
3. Evaluate the appropriateness of accounting policies used and
the
reasonableness of accounting estimates and related disclosures made
by management.
4. Conclude on the appropriateness of management’s use of the going
concern
basis of accounting and, based on the audit evidence obtained,
whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability
to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our
auditors’ report to the related disclosures in the consolidated
financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditors’ report. However, future
events or conditions may cause the Company to cease to continue as
a going concern.
5. Evaluate the overall presentation, structure and content of the
consolidated
financial statements, including the disclosures, and whether the
consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair
presentation.
6. Obtain sufficient appropriate audit evidence regarding the
financial
information of the entities or business activities within the
Company to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible for
our audit opinion.
We communicate with those charged with governance regarding, among
other matters, the planned scope and timing of the audit and
significant audit findings,
- 20 -
including any significant deficiencies in internal control that we
identify during our audit. We also provide those charged with
governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate
with them all relationships and other matters that may reasonably
be thought to bear on our independence, and where applicable,
related safeguards. From the matters communicated with those
charged with governance, we determine those matters that were of
most significance in the audit of the consolidated financial
statements for the year ended December 31, 2019 and are therefore
the key audit matters. We describe these matters in our auditors’
report unless law or regulation precludes public disclosure about
the matter or when, in extremely rare circumstances, we determine
that a matter should not be communicated in our report because the
adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication. The
engagement partners on the audit resulting in this independent
auditors’ report are Mei Yen Chiang and Yu Feng Huang.
Deloitte & Touche Taipei, Taiwan Republic of China February 11,
2020
Notice to Readers The accompanying consolidated financial
statements are intended only to present the consolidated financial
position, financial performance and cash flows in accordance with
accounting principles and practices generally accepted in the
Republic of China and not those of any other jurisdictions. The
standards, procedures and practices to audit such consolidated
financial statements are those generally applied in the Republic of
China. For the convenience of readers, the independent auditors’
report and the accompanying consolidated financial statements have
been translated into English from the original Chinese version
prepared and used in the Republic of China. If there is any
conflict between the English version and the original Chinese
version or any difference in the interpretation of the two
versions, the Chinese-language independent auditors’ report and
consolidated financial statements shall prevail.
- 21 -
- 22 -
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands of New Taiwan Dollars, Except Earnings Per
Share)
2019 2018
Amount % Amount %
NET REVENUE (Notes 5, 22, 33 and 39) $1,069,985,448 100
$1,031,473,557 100
COST OF REVENUE (Notes 5, 12, 29, 33 and 37) 577,286,947 54
533,487,516 52
GROSS PROFIT BEFORE REALIZED
ASSOCIATES 492,698,501 46 497,986,041 48
REALIZED (UNREALIZED) GROSS PROFIT ON
SALES TO ASSOCIATES 3,395 - (111,788) -
GROSS PROFIT 492,701,896 46 497,874,253 48
OPERATING EXPENSES (Notes 5, 29 and 33)
Research and development 91,418,746 8 85,895,569 8
General and administrative 21,737,210 2 20,265,883 2
Marketing 6,348,626 1 5,987,828 1
Total operating expenses 119,504,582 11 112,149,280 11
OTHER OPERATING INCOME AND EXPENSES,
NET (Notes 14, 15, 23 and 29) (496,224) - (2,101,449) -
INCOME FROM OPERATIONS (Note 39) 372,701,090 35 383,623,524
37
NON-OPERATING INCOME AND EXPENSES
Other income (Note 24) 16,606,669 1 14,852,814 2
Foreign exchange gain, net (Note 36) 2,095,217 - 2,438,171 -
Finance costs (Note 25) (3,250,847) - (3,051,223) -
Other gains and losses, net (Note 26) (1,151,015) - (3,410,804)
-
Total non-operating income and expenses 17,144,246 1 13,886,739
2
INCOME BEFORE INCOME TAX 389,845,336 36 397,510,263 39
INCOME TAX EXPENSE (Notes 5 and 27) 44,501,527 4 46,325,857 5
NET INCOME 345,343,809 32 351,184,406 34
(Continued)
- 23 -
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands of New Taiwan Dollars, Except Earnings Per
Share)
2019 2018
Amount % Amount %
Items that will not be reclassified subsequently to
profit or loss:
Unrealized gain/(loss) on investments in equity
instruments at fair value through other
comprehensive income 334,327 - (3,309,089) -
Share of other comprehensive loss of associates (18,271) - (14,217)
-
Income tax benefit (expense) related to items that
will not be reclassified subsequently (20,992) - 195,729 -
439,367 - (3,947,764) -
or loss:
comprehensive income 2,566,373 - (870,906) -
associates (140,195) - 93,260 -
net of income tax (11,823,562) (1) 9,836,976 1
TOTAL COMPREHENSIVE INCOME FOR THE
YEAR $ 333,520,247 31 $ 361,021,382 35
NET INCOME ATTRIBUTABLE TO:
Non-controlling interests 80,141 - 53,522 -
$ 345,343,809 32 $ 351,184,406 34
Non-controlling interests 79,787 - 56,367 -
$ 333,520,247 31 $ 361,021,382 35
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands of New Taiwan Dollars, Except Earnings Per
Share)
2019 2018
EARNINGS PER SHARE (NT$, Note 28)
Basic earnings per share $ 13.32 $ 13.54
Diluted earnings per share $ 13.32 $ 13.54
The accompanying notes are an integral part of the consolidated
financial statements. (Concluded)
- 25 -
- 26 -
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of New Taiwan Dollars)
2019 2018
Income before income tax $ 389,845,336 $ 397,510,263
Adjustments for:
instruments 1,714 (2,383)
Interest income (16,189,374) (14,694,456)
Share-based compensation 2,818 -
Loss on disposal or retirement of property, plant and equipment,
net 949,965 1,005,644
Loss (gain) on disposal of intangible assets, net 2,377 (436)
Impairment loss (reversal of impairment loss) on property, plant
and
equipment (301,384) 423,468
Loss on financial instruments at fair value through profit or loss,
net 955,723 358,156
Loss (gain) on disposal of investments in debt instruments at
fair
value through other comprehensive income, net (537,835)
989,138
Loss from disposal of subsidiaries 4,598 -
Unrealized (realized) gross profit on sales to associates (3,395)
111,788
Loss (gain) on foreign exchange, net (5,228,218) 2,916,659
Dividend income (417,295) (158,358)
Loss (gain) arising from fair value hedges, net (13,091)
2,386
Gain on lease modification (2,075) -
Changes in operating assets and liabilities:
Financial instruments at fair value through profit or loss 848,750
480,109
Notes and accounts receivable, net (18,119,552) (13,271,268)
Receivables from related parties (277,658) 599,712
Other receivables from related parties 13,375 106,030
Inventories 20,249,780 (29,369,975)
Other noncurrent assets - 152,555
Accounts payable 5,860,068 4,540,583
Accrued profit sharing bonus to employees and compensation to
directors and supervisors (332,251) 562,019
Accrued expenses and other current liabilities (2,372,032)
(20,226,384)
Net defined benefit liability (215,014) (60,461)
Cash generated from operations 667,182,815 619,336,831
Income taxes paid (52,044,071) (45,382,523)
Net cash generated by operating activities 615,138,744
573,954,308
(Continued)
- 27 -
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of New Taiwan Dollars)
2019 2018
Acquisitions of:
Financial instruments at fair value through profit or loss $
(124,748) $ (310,478)
Financial assets at fair value through other comprehensive income
(257,558,240) (96,412,786)
Financial assets at amortized cost (313,958) (2,294,098)
Property, plant and equipment (460,422,150) (315,581,881)
Intangible assets (9,329,869) (7,100,306)
Financial instruments at fair value through profit or loss -
debt
instruments 2,418,153 487,216
Financial assets at fair value through other comprehensive income
230,444,486 86,639,322
Financial assets at amortized cost 14,349,190 2,032,442
Property, plant and equipment 287,318 181,450
Intangible assets - 492
Proceeds from return of capital of investments in equity
instruments at
fair value through other comprehensive income 1,107 127,878
Derecognition of hedging financial instruments (436,606)
250,538
Interest received 16,874,985 14,660,388
Proceeds from government grants - land use right and others 850,623
-
Other dividends received 320,242 158,358
Dividends received from investments accounted for using
equity
method 1,718,954 3,262,910
Net cash used in investing activities (458,801,647)
(314,268,908)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term loans 31,804,302 23,922,975
Repayment of bonds (34,900,000) (58,024,900)
Repayment of the principal portion of lease liabilities (2,930,589)
-
Interest paid (3,597,145) (3,233,331)
Cash dividends (259,303,805) (207,443,044)
Decrease in non-controlling interests (75,869) (77,413)
Net cash used in financing activities (269,638,166)
(245,124,791)
(Continued)
- 28 -
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of New Taiwan Dollars)
2019 2018
EQUIVALENTS $ (9,114,196) $ 9,862,296
EQUIVALENTS (122,415,265) 24,422,905
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 577,814,601
553,391,696
CASH AND CASH EQUIVALENTS, END OF YEAR $ 455,399,336 $
577,814,601
The accompanying notes are an integral part of the consolidated
financial statements. (Concluded)
- 29 -
The Board of Directors and Shareholders Taiwan Semiconductor
Manufacturing Company Limited
Opinion
We have audited the accompanying parent company only financial
statements of Taiwan Semiconductor Manufacturing Company Limited
(the “Company”), which comprise the parent company only balance
sheets as of December 31, 2019 and 2018, and the parent company
only statements of comprehensive income, changes in equity and cash
flows for the years then ended, and the notes to the parent company
only financial statements, including a summary of significant
accounting policies.
In our opinion, the accompanying parent company only financial
statements present fairly, in all material respects, the
accompanying parent company only financial position of the Company
as of December 31, 2019 and 2018, and its parent company only
financial performance and its parent company only cash flows for
the years then ended in accordance with the Regulations Governing
the Preparation of Financial Reports by Securities Issuers.
Basis for Opinion
We conducted our audits in accordance with the Regulations
Governing Auditing and Attestation of Financial Statements by
Certified Public Accountants and auditing standards generally
accepted in the Republic of China. Our responsibilities under those
standards are further described in the Auditors’ Responsibilities
for the Audit of the Parent Company Only Financial Statements
section of our report. We are independent of the Company in
accordance with The Norm of Professional Ethics for Certified
Public Accountant of the Republic of China, and we have fulfilled
our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our
opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the parent
company only financial statements for the year ended December 31,
2019. These matters were addressed in the context of our audit of
the parent company only financial statements as a whole, and
in
- 30 -
forming our opinion thereon, and we do not provide a separate
opinion on these matters.
Key audit matters for the Company’s parent company only financial
statements for the year ended December 31, 2019 are stated as
follows:
Property, plant and equipment (PP&E) – commencement of
depreciation related to PP&E classified as equipment under
installation and construction in progress (EUI/CIP)
Refer to Notes 4, 5 and 12 to the parent company only financial
statements.
The Company’s evaluation of when to commence depreciation of
EUI/CIP involves determining when the assets are available for
their intended use. The criteria the Company uses to determine
whether EUI/CIP are available for their intended use involves
subjective judgements and assumptions about the conditions
necessary for the assets to be capable of operating in the intended
manner. Changes in these assumptions could have a significant
impact on when depreciation is recognized.
Given the subjectivity in determining the date to commence
depreciation of EUI/CIP, performing audit procedures to evaluate
the reasonableness of the Company’s judgements and assumptions
required a high degree of auditor judgement. Consequently, the
validity of commencement of depreciation related to PP&E
classified as EUI/CIP is identified as a key audit matter.
Our audit procedures related to the evaluation of when to commence
depreciation of EUI/CIP included the following, among others:
1. We read the Company’s policy and understand the criteria used to
determine when to commence depreciation.
2. We tested the effectiveness of the controls over the evaluation
of when to commence depreciation of EUI/CIP.
3. We sampled EUI/CIP at year end and performed the following for
each selection:
a. Evaluated whether the selection did not meet the criteria
specified by the Company for commencement of depreciation.
b. Observed the assets and evaluated their status at year
end.
4. We sampled and evaluated whether the selection of EUI/CIP met
the criteria specified by the Company for commencement of
depreciation during the year.
- 31 -
5. We sampled and evaluated whether the selection of EUI/CIP met
the criteria specified by the Company for commencement of
depreciation subsequent to year end.
Responsibilities of Management and Those Charged with Governance
for the Parent Company Only Financial Statements
Management is responsible for the preparation and fair presentation
of the parent company only financial statements in accordance with
the Regulations Governing the Preparation of Financial Reports by
Securities Issuers, and for such internal control as management
determines is necessary to enable the preparation of parent company
only financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the parent company only financial statements,
management is responsible for assessing the Company’s ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless management either intends to liquidate the
Company or to cease operations, or has no realistic alternative but
to do so.
Those charged with governance (including members of the Audit
Committee) are responsible for overseeing the Company’s financial
reporting process.
Auditors’ Responsibilities for the Audit of the Parent Company Only
Financial Statements
Our objectives are to obtain reasonable assurance about whether the
parent company only financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue
an auditors’ report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with the auditing standards generally
accepted in the Republic of China will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these parent
company only financial statements.
As part of an audit in accordance with the auditing standards
generally accepted in the Republic of China, we exercise
professional judgment and maintain professional skepticism
throughout the audit. We also:
1. Identify and assess the risks of material misstatement of the
parent company only financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those
risks, and obtain audit evidence that is sufficient and appropriate
to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for
one
- 32 -
resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of
internal control.
2. Obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control.
3. Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures made
by management.
4. Conclude on the appropriateness of management’s use of the going
concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Company’s
ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in
our auditors’ report to the related disclosures in the parent
company only financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the
audit evidence obtained up to the date of our auditors’ report.
However, future events or conditions may cause the Company to cease
to continue as a going concern.
5. Evaluate the overall presentation, structure and content of the
parent company only financial statements, including the
disclosures, and whether the parent company only financial
statements represent the underlying transactions and events in a
manner that achieves fair presentation.
6. Obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business activities within
the Company to express an opinion on the parent company only
financial statements. We are responsible for the direction,
supervision and performance of the group audit. We remain solely
responsible for our audit opinion.
We communicate with those charged with governance regarding, among
other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide those charged with governance with a statement that
we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
- 33 -
From the matters communicated with those charged with governance,
we determine those matters that were of most significance in the
audit of the parent company only financial statements for the year
ended December 31, 2019 and are therefore the key audit matters. We
describe these matters in our auditors’ report unless law or
regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not
be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
The engagement partners on the audit resulting in this independent
auditors’ report are Mei Yen Chiang and Yu Feng Huang.
Deloitte & Touche Taipei, Taiwan Republic of China
February 11, 2020
Notice to Readers
The accompanying financial statements are intended only to present
the financial position, financial performance and cash flows in
accordance with accounting principles and practices generally
accepted in the Republic of China and not those of any other
jurisdictions. The standards, procedures and practices to audit
such financial statements are those generally applied in the
Republic of China.
For the convenience of readers, the independent auditors’ report
and the accompanying financial statements have been translated into
English from the original Chinese version prepared and used in the
Republic of China. If there is any conflict between the English
version and the original Chinese version or any difference in the
interpretation of the two versions, the Chinese-language
independent auditors’ report and financial statements shall
prevail.
- 34 -
- 35 -
PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands of New Taiwan Dollars, Except Earnings Per
Share)
2019 2018
Amount % Amount %
NET REVENUE (Notes 5, 20 and 31) $1,059,646,793 100 $1,023,925,713
100
COST OF REVENUE (Notes 5, 10, 27, 31 and 34) 579,507,047 55
530,861,166 52
GROSS PROFIT BEFORE REALIZED
SUBSIDIARIES AND ASSOCIATES 480,139,746 45 493,064,547 48
REALIZED (UNREALIZED) GROSS PROFIT ON
SALES TO SUBSIDIARIES AND ASSOCIATES 3,395 - (109,046) -
GROSS PROFIT 480,143,141 45 492,955,501 48
OPERATING EXPENSES (Notes 5, 27 and 31)
Research and development 90,482,815 8 84,944,461 8
General and administrative 20,353,327 2 19,113,298 2
Marketing 3,231,777 - 3,201,670 -
OTHER OPERATING INCOME AND EXPENSES,
NET (Notes 12, 13, 21 and 27) (151,230) - (1,668,234) -
INCOME FROM OPERATIONS 365,923,992 35 384,027,838 38
NON-OPERATING INCOME AND EXPENSES
11) 22,906,788 2 12,509,959 1
Other income (Note 22) 2,180,251 - 2,005,107 -
Foreign exchange gain, net (Note 33) 1,994,370 - 1,927,029 -
Finance costs (Note 23) (3,191,609) - (2,903,454) -
Other gains and losses (Note 24) (1,068,573) - (1,368,326) -
Total non-operating income and expenses 22,821,227 2 12,170,315
1
INCOME BEFORE INCOME TAX 388,745,219 37 396,198,153 39
INCOME TAX EXPENSE (Notes 5 and 25) 43,481,551 4 45,067,269 5
NET INCOME 345,263,668 33 351,130,884 34
(Continued)
- 36 -
PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands of New Taiwan Dollars, Except Earnings Per
Share)
2019 2018
Amount % Amount %
Items that will not be reclassified subsequently to
profit or loss:
Unrealized gain/(loss) on investments in equity
instruments at fair value through other
comprehensive income 121,740 - (1,189,957) -
subsidiaries and associates 194,524 - (2,135,880) -
Income tax benefit (expense) related to items that
will not be reclassified subsequently (20,992) - 195,729 -
439,575 - (3,950,295) -
or loss:
Share of other comprehensive income (loss) of
subsidiaries and associates 2,435,334 - (794,057) -
(12,262,783) (2) 13,784,426 1
net of income tax (11,823,208) (2) 9,834,131 1
TOTAL COMPREHENSIVE INCOME FOR THE
YEAR $ 333,440,460 31 $ 360,965,015 35
EARNINGS PER SHARE (NT$, Note 26)
Basic earnings per share $ 13.32 $ 13.54
Diluted earnings per share $ 13.32 $ 13.54
The accompanying notes are an integral part of the parent company
only financial statements. (Concluded)
- 37 -
- 38 -
PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS
(In Thousands of New Taiwan Dollars)
2019 2018
Income before income tax $ 388,745,219 $ 396,198,153
Adjustments for:
Interest income (2,002,877) (1,847,202)
Loss on disposal or retirement of property, plant and equipment,
net 582,289 557,598
Gain on disposal of intangible assets, net (6,183) (5,933)
Impairment loss (reversal of impairment loss) on property, plant
and
equipment (301,384) 423,468
Loss (gain) on financial instruments at fair value through profit
or
loss, net 18,291 (17,729)
Gain on disposal of investments accounted for using equity
method,
net (15,200) -
associates (3,395) 109,046
Dividend income (177,374) (157,905)
Changes in operating assets and liabilities:
Financial instruments at fair value through profit or loss 964,207
301,714
Notes and accounts receivable, net (20,264,116) (15,821,089)
Receivables from related parties 4,258,083 5,689,253
Other receivables from related parties 442,439 216,794
Inventories 21,824,309 (27,790,715)
Accounts payable 5,626,778 4,839,526
Accrued profit sharing bonus to employees and compensation to
directors (393,163) 531,310
Net defined benefit liability (215,014) (60,461)
Cash generated from operations 644,475,665 612,057,615
Income taxes paid (51,043,594) (43,956,272)
Net cash generated by operating activities 593,432,071
568,101,343
(Continued)
- 39 -
PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS
(In Thousands of New Taiwan Dollars)
2019 2018
Acquisitions of:
Intangible assets (9,252,712) (6,885,163)
Financial assets at fair value through other comprehensive income
775,282 651,971
Property, plant and equipment 1,118,338 4,707,118
Intangible assets - 15,881
Proceeds from return of capital of financial assets carried at cost
2,300,000 -
Proceeds from return of capital of investments in equity
instruments at
fair value through other comprehensive income 1,107 3,456
Derecognition of hedging financial instruments (93,536)
57,954
Interest received 2,016,735 1,815,330
Dividends received from investments accounted for using
equity
method 2,225,194 3,769,150
Net cash used in investing activities (451,460,013)
(296,555,902)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term loans 59,615,602 27,154,770
Repayment of bonds (34,900,000) (24,300,000)
Repayment of the principal portion of lease liabilities (2,630,308)
-
Interest paid (3,536,180) (2,957,663)
Cash dividends (259,303,805) (207,443,044)
Proceeds from partial disposal of interests in subsidiaries 18,500
144,676
Donation from shareholders 3,906 10,095
Net cash used in financing activities (240,723,885)
(270,519,757)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (98,751,827) 1,025,684
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 240,202,525
239,176,841
CASH AND CASH EQUIVALENTS, END OF YEAR $ 141,450,698 $
240,202,525
The accompanying notes are an integral part of the parent company
only financial statements. (Concluded)
- 40 -
Unit: NT$
Less:
Plus:
- Unappropriated Retained Earnings of Previous Years
842,609,828,900
- Disposal of Investments in Equity Instruments at Fair Value
through Other Comprehensive Income
162,116,727
Retained Earnings Available for Distribution as of December 31,
2019
1,176,132,563,323
Distribution Item Note:
- 1Q19 Cash Dividends to Common Share Holders (NT$2.0 per share)
-51,860,760,916
- 2Q19 Cash Dividends to Common Share Holders (NT$2.5 per share)
-64,825,951,145
- 3Q19 Cash Dividends to Common Share Holders (NT$2.5 per share)
-64,825,951,145
- 4Q19 Cash Dividends to Common Share Holders (NT$2.5 per share)
-64,825,951,145
Unappropriated Retained Earnings 929,793,948,972
Note: Cash dividends were approved by the Board of Directors and to
be reported at the Annual
Shareholders’ Meeting.
Attachment VI
Comparison Table for the Procedures for Lending Funds to Other
Parties Before and After Revisions
Before the Revision After the Revision
Article 3
The total amount available for lending purpose shall not exceed
twenty percent (20%) of the net worth of the Company.
The lending limits for any borrower are set forth below:
1. The total amount for lending to a company having a business
relationship with the Company shall not exceed the total
transaction amount between the parties during the period of twelve
(12) months prior to the time of lending (for purposes of the
Procedures, the “transaction amount” shall mean the sales or
purchasing amount between the parties, whichever is higher), and
shall not exceed ten percent (10%) of the net worth of the
Company.
2. The total amount for lending to a company in need of funds for a
short-term period shall not exceed ten percent (10%) of the net
worth of the Company.
The total amount available to each borrower shall not be more than
thirty percent (30%) of the borrower’s net worth, provided that
this restriction will not apply to subsidiaries whose voting
Article 3
The total amount available for lending purpose shall not exceed
twenty percent (20%) of the net worth of the Company.
The lending limits for any borrower are set forth below:
1. The total amount for lending to a company having a business
relationship with the Company shall not exceed the total
transaction amount between the parties during the period of twelve
(12) months prior to the time of lending (for purposes of the
Procedures, the “transaction amount” shall mean the sales or
purchasing amount between the parties, whichever is higher), and
shall not exceed ten percent (10%) of the net worth of the
Company.
2. The total amount for lending to a company in need of funds for a
short-term period shall not exceed ten percent (10%) of the net
worth of the Company.
The total amount available to each borrower shall not be more than
thirty percent (30%) of the borrower’s net worth, provided that
this restriction will not apply to subsidiaries whose voting
- 42 -
shares are 100% owned, directly or indirectly, by the
Company.
For fund-lending (for financing needs) between offshore
subsidiaries whose voting shares are 100% owned, directly or
indirectly, by the Company, the total amount for such fund-lending
shall not be subject to the limit of twenty percent (20%) of the
net worth of the lending subsidiary and the lending will not be
subject to the restrictions under Article 4. However, these
offshore subsidiaries shall stipulate the loan amount limits and
term of loans in its lending procedures for such lending in
accordance with the “Regulations Governing Loaning of Funds and
Making of Endorsements/Guarantees by Public Companies” announced by
the securities regulatory authority.
shares are 100% owned, directly or indirectly, by the
Company.
For fund-lending (for financing needs) between offshore
subsidiaries whose voting shares are 100% owned, directly or
indirectly, by the Company, or fund-lending to the Company by
offshore subsidiaries whose voting shares are 100% owned, directly
or indirectly, by the Company, the total amount for such
fund-lending shall not be subject to the limit of twenty percent
(20%) of the net worth of the lending subsidiary and the lending
will not be subject to the restrictions under Article 4. However,
these offshore subsidiaries shall stipulate the loan amount
limitstotal limit of fund-lending as well as the fund-lending limit
and term of loanstenor to each borrower in its lending procedures
for such lending in accordance with the “Regulations Governing
Loaning of Funds and Making of Endorsements/Guarantees by Public
Companies” announced by the securities regulatory authority.
A tt
ac h
m en
t V
Taiwan Semiconductor Manufacturing Company Limited Rules and
Procedures of Shareholders’ Meeting
1. Shareholders’ Meeting of the Company (the “Meeting”) shall be
conducted in accordance with these Rules and Procedures. Any matter
not provided in these Rules and Procedures shall be handled in
accordance with relevant laws and regulations.
2. Shareholders attending the Meeting shall submit the attendance
card for the purpose of signing in.
The number of shares represented by shareholders attending the
Meeting shall be calculated in accordance with the attendance cards
submitted by the shareholders.
3. The Meeting shall be held at the head office of the Company or
at any other appropriate place that is convenient for the
shareholders to attend. The time to start the Meeting shall not be
earlier than 9:00 a.m. or later than 3:00 p.m.
4. The Company may appoint designated counsel, CPA or other related
persons to attend the Meeting.
Persons handling affairs of the Meeting shall wear identification
cards or badges.
5. The process of the Meeting shall be taperecorded or videotaped
and these tapes shall be preserved for at least one year.
6. The Chairman of the Board of Directors shall be the chairman
presiding at the Meeting in the case that the Meeting is convened
by the Board of Directors. If, for any reason, the Chairman of the
Board of Directors cannot preside at the Meeting, the Vice Chairman
of the Board of Directors or one of the Directors shall preside at
the Meeting in accordance with Article 208 of the Company Law of
the Republic of China.
If the Meeting is convened by any other person entitled to convene
the Meeting, such person shall be the chairman to preside at the
Meeting.
7. Chairman shall call the Meeting to order at the time scheduled
for the
- 46 -
Meeting. If the number of shares represented by the shareholders
present at the Meeting has not yet constituted the quorum at the
time scheduled for the Meeting, the chairman may postpone the time
for the Meeting. The postponements shall be limited to two times at
the most and Meeting shall not be postponed for longer than one
hour in the aggregate. If after two postponements no quorum can yet
be constituted but the shareholders present at the Meeting
represent more than one - third of the total outstanding shares,
tentative resolutions may be made in accordance with Section 1 of
Article 175 of the Company Law of the Republic of China. The
aforesaid tentative resolutions shall be executed in accordance
with relevant provisions of the Company Law of the Republic of
China.
If during the process of the Meeting the number of outstanding
shares represented by the shareholders present becomes sufficient
to constitute the quorum, the chairman may submit the tentative
resolutions to the Meeting for approval in accordance with Article
174 of the Company Law of the Republic of China.
8. The agenda of the Meeting shall be set by the Board of Directors
if the Meeting is convened by the Board of Directors. Unless
otherwise resolved at the Meeting, the Meeting shall proceed in
accordance with the agenda.
The above provision applies mutatis mutandis to cases where the
Meeting is convened by any person, other than the Board of
Directors, entitled to convene such Meeting.
Unless otherwise resolved at the Meeting, the chairman cannot
announce adjournment of the Meeting before all the discussion items
(including special motions) listed in the agenda are
resolved.
The shareholders cannot designate any other person as chairman and
continue the Meeting in the same or other place after the Meeting
is adjourned. However, in the event that the Chairman adjourns the
Meeting in violation of these Rules and Procedures, the
shareholders may designate, by a majority of votes represented by
shareholders attending the Meeting, one person as chairman to
continue the Meeting.
9. Shareholders attending the Meeting shall have the obligation to
observe Meeting rules, obey resolutions and maintain order at
Meeting place.
10. Any legal entity designated as proxy by a shareholder(s) to be
present at the Meeting may appoint only one representative to
attend the Meeting.
11. When a shareholder present at the Meeting wishes to speak, a
Speech Note should be filled out with summary of the speech, the
shareholder’s number
- 47 -
(or the number of Attendance Card) and the name of the shareholder.
The sequence of speeches by shareholders should be decided by the
chairman.
Unless otherwise permitted by the chairman, each shareholder shall
not, for each discussion item, speak more than two times (each time
not exceeding 5 minutes). In case the speech of any shareholder
violates the above provision or exceeds the scope of the discussion
item, the chairman may stop the speech of such shareholder.
If any shareholder present at the Meeting submits a Speech Note but
does not speak, no speech should be deemed to have been made by
such shareholder. In case the contents of the speech of a
shareholder are inconsistent with the contents of the Speech Note,
the contents of actual speech shall prevail.
Unless otherwise permitted by the chairman and the shareholder in
speaking, no shareholder shall interrupt the speeches of the other
shareholders, otheriwse the chairman shall stop such
interruption.
If a corporate shareholder designates two or more representatives
to attend the Meeting, only one representative can speak for each
discussion item.
After the speech of a shareholder, the chairman may respond
himself/herself or appoint an appropriate person to respond.
12. The chairman may announce to end the discussion of any
resolution and
go into voting if the Chairman deems it appropriate. 13. The
person(s) to check and the person(s) to record the ballots during a
vote
by casting ballots shall be appointed by the chairman. The
person(s) checking the ballots shall be a shareholder(s). The
result of voting shall be announced at the Meeting and placed on
record.
14. Except otherwise specified in the Company Law of the Republic
of China
or the Articles of Incorporation of the Company, a resolution shall
be adopted by a majority of the votes represented by the
shareholders present at the Meeting. The resolution shall be deemed
adopted and shall have the same effect as if it was voted by
casting ballots if no objection is voiced after solicitation by the
chairman.
15. During the Meeting, the chairman may, at his discretion, set
time for
intermission. In case of incident of force majeure, the chairman
may decide to temporarily suspend the Meeting and announce,
depending on the situation, when the Meeting will resume or, by
resolution of the shareholders present at the Meeting, the chairman
may resume the
- 48 -
Meeting within five days without further notice or public
announcement.
16. If there is amendment to or substitute for a discussion item,
the chairman shall decide the sequence of voting for such
discussion item, the amendment or the substitute. If any one of
them has been adopted, the others shall be deemed vetoed and no
further voting is necessary.
17. The chairman may conduct the disciplinary officers or the
security guard to assist in keeping order of the Meeting place.
Such disciplinary officers or security guards shall wear badges
marked “Disciplinary Officers” for identification purpose.
18. These Rules and Procedures shall be effective from the date it
is approved by the Shareholders’ Meeting. The same applies in case
of revision.
- 49 -
- 50 -
Article 1
The Corporation shall be incorporated, as a company limited by
shares, under the Company Law of the Republic of China, and its
name shall be in the Chinese language, and Taiwan Semiconductor
Manufacturing Company Limited in the English language.
Article 2
The scope of business of the Corporation shall be as follows:
1. Manufacturing and sales of integrated circuits and assembly of
other semiconductor devices in wafer form at the order of and
pursuant to product design specifications provided by customers.
Provision of packaging and testing services related to the above
services. Providing computer assisted design services and
technology for integrated circuits. Providing mask making and mask
design services. (CC01080 Electronic Parts and Components
Manufacturing)
2. Researching, developing, designing, manufacturing and selling
LED lighting devices and related applications products and systems.
(CC01080 Electronic Parts and Components Manufacturing) (CC01040
Electric Wires and Cables Manufacturing)
3. Researching, developing, designing, manufacturing and selling
renewable energy and efficiency related technologies and products,
including solar cells, solar photovoltaic modules and their related
systems and applications. (CC01080 Electronic Parts and Components
Manufacturing) (IG03010 Energy Technical Services) (CC01090
Batteries Manufacturing)
4. Selling recycled and processed chemical, metal, and plastic
materials and products derived from the Corporation’s manufacturing
activities. (C801990 Other Chemical Materials Manufacturing)
(C802990 Other Chemical Products Manufacturing) (CA02990 Other
Fabricated Metal Products Manufacturing) (C805990 Other Plastic
Products Manufacturing)
Article 3
The Corporation shall have its head office in Hsinchu Science Park,
Taiwan, Republic of China, and shall be free, upon approval of
government authorities in charge, to set up representative and
branch offices at various locations within and
- 51 -
without the territory of the Republic of China, wherever and
whenever the Corporation deems it necessary or advisable to carry
out any or all of its activities.
Article 4
Public announcements of the Corporation shall be made in accordance
with the Company Law and other relevant rules and regulations of
the Republic of China.
Article 5
The Corporation may provide endorsement and guarantee and act as a
guarantor.
Article 6
The total amount of the Corporation’s reinvestment shall not be
subject to the restriction of not more than forty percent of the
Corporation’s paid-up capital as provided in Article 13 of the
Company Law. Any matters regarding the reinvestment shall be
resolved in accordance with the resolutions of the Board of
Directors.
Section II - Capital Stock
Article 7
The total capital stock of the Corporation shall be in the amount
of 280,500,000,000 New Taiwan Dollars, divided into 28,050,000,000
shares, at ten New Taiwan Dollars each, and may be paid-up in
installments.
The Corporation may issue employee stock options from time to time.
A total of 500,000,000 shares among the above total capital stock
should be reserved for issuing employee stock options.
Article 8
The Corporation may issue shares without printing share
certificate(s). If the Corporation decides to print share
certificates for shares issued, the Corporation shall comply with
relevant provisions of the Company Law and relevant rules and
regulations of the Republic of China.
Article 9
The share certificates of the Corporation shall all be name-bearing
share certificates, and issued in accordance with the Company Law
and relevant rules and regulations of the Republic of China.
- 52 -
Article 10
All transfer of stocks, pledge of rights, loss, succession, gift,
loss of seal, amendment of seal, change of address or similar stock
transaction conducted by shareholders of the Corporation shall
follow the “Guidelines for Stock Operations for Public Companies”
unless specified otherwise by law and securities regulations.
Article 11
Registration for transfer of shares shall be suspended sixty (60)
days immediately before the date of regular meeting of
shareholders, and thirty (30) days immediately before the date of
any special meeting of shareholders, or within five (5) days before
the day on which dividend, bonus, or any other benefit is scheduled
to be paid by the Corporation.
Article 12
Shareholders’ meetings of the Corporation are of two types, namely:
(1) regular meetings and (2) special meetings. Regular meetings
shall be convened, by the Board of Directors, within six (6) months
after the close of each fiscal year. Special meetings shall be
convened in accordance with the relevant laws, rules and
regulations of the Republic of China.
Article 13
Written notices shall be sent to all shareholders at their latest
places of residence as registered with the Corporation for the
convening of shareholders’ meetings, at least thirty (30) days in
advance, in case of regular meetings; and at least fifteen (15)
days in advance, in case of special meetings. The purpose(s) for
convening any such meeting shall be clearly stated in the written
notices sent out to the shareholders. Notices shall be written in
Chinese, and English when necessary.
Article 14
Except as provided in the Company Law of the Republic of China,
shareholders’ meetings may be held if attended by shareholders in
person or by proxy representing more than one half of the total
issued and outstanding capital stock of the Corporation, and
resolutions shall be adopted at the meeting with the concurrence of
a majority of the votes held by shareholders present at the
meeting. According to regulatory requirements, shareholders may
also vote via an electronic voting system, and those who do shall
be deemed as attending the shareholders’ meeting in person;
electronic voting shall be conducted in accordance with the
relevant laws and regulations.
- 53 -
Each share of stock shall be entitled to one vote.
Article 16
If a shareholder is unable to attend a meeting, he/she may appoint
a representative to attend it, and to exercise, on his/her behalf,
all rights at the meeting, in accordance with Article 177 of the
Company Law. A representative does not need to be a shareholder of
the Corporation.
Article 17
The shareholders’ meeting shall be presided over by the Chairman of
the Board of Directors of the Corporation. In his absence, either
the Vice Chairman of the Board of Directors, or one of the
Directors shall preside in accordance with Article 208 of the
Company Law.
Article 18
The resolutions of the shareholders’ meeting shall be recorded in
the minutes, and such minutes shall be signed by or sealed with the
chop of the chairman of the meeting. Such minutes, together with
the attendance list and proxies, shall be filed and kept at the
head office of the Corporation. The minutes shall be drafted in
both the Chinese language and the English language.
Section III - Directors
Article 19
The Corporation shall have seven to ten Directors. The Board of
Directors is authorized to determine the number of Directors.
The aforesaid Board of Directors must have at least three
independent directors.
Article 19-1
For the election of Directors, each share has the same voting
rights equal to the number of Directors to be elected, and a
shareholder may cast all his/her voting rights to one candidate or
among several candidates; those candidates receiving more voting
rights shall be elected as Directors.
Directors shall be elected by adopting candidates nomination system
as specified
- 54 -
in Article 192-1 of the Company Law. The nomination of directors
and related announcement shall comply with the relevant regulations
of the Company Law and the Securities and Exchange Law. The
election of independent directors and non- independent directors
shall be held together; provided, however, the number of
independent directors and non-independent directors elected shall
be calculated separately.
Article 19-2
In compliance with Articles 14-4 of the Securities and Exchange
Law, the Corporation shall establish an Audit Committee, which
shall consist of all independent directors. The Audit Committee or
the members of Audit Committee shall be responsible for those
responsibilities of Supervisors specified under the Company Law,
the Securities and Exchange Law and other relevant
regulations.
Article 20
The term of office for Directors shall be three (3) years, and all
Directors shall be eligible for re-election.
Article 21
Except as otherwise provided in the Company Law of the Republic of
China, a meeting of the Board of Directors may be held if attended
by a majority of total Directors and resolutions shall be adopted
with the concurrence of the majority of the Directors present at
the meeting.
Article 22
The Directors shall elect from among themselves a Chairman of the
Board of Directors, and may elect a Vice Chairman of the Board of
Directors, by a majority in a meeting attended by over two-thirds
of the Directors. The Chairman shall not have a second or casting
vote at any meeting of the Board of Directors. The Chairman of the
Board of Directors shall have the authority to represent the
Corporation.
Article 23
Except the first Board meeting of every term of the newly elected
Board of Directors, which shall be convened by the Director who has
received the largest number of votes after such new election,
meetings of the Board of Directors shall be convened by the
Chairman of the Board of Directors, upon written notice mailed to
all the other Directors, at least fourteen days, unless in case of
urgent circumstances, prior to the date of the meeting, specifying
the date and place of the meeting and its agenda. The meeting of
the Board of Directors shall be held at least
- 55 -
once every quarter. Such prescribed notices may be waived in
writing by any Director, either before or after the meeting. The
meetings of the Board of Directors may be convened, at any time,
without such prescribed notice in case of urgent circumstances.
Notices shall be written in both the Chinese language and the
English language. Personal attendance at a meeting will represent a
waiver of the notice. Any Director attending the meeting via video
conference shall be deemed attending the meeting in person.
Article 24
The Chairman of the Board of Directors shall preside over all
meetings of the Board of Directors. In addition, the Chairman shall
have the right to execute documents in accordance with the
resolutions of the Board of Directors in the name and on behalf of
the Corporation as well as acting on behalf of the Board pursuant
to Board resolutions and the Corporation’s objectives when the
Board is not in session. In his absence, the Vice Chairman of the
Board of Directors, or any one of the Directors shall be acting for
him according to Article 208 of the Company Law.
Article 25
A Director may, by written authorization, appoint another Director
to attend on his behalf any meeting of the Board of Directors, and
to vote for him on all matters presented at such meeting, but no
Director may act as proxy for more than one other Director.
Article 26
The Directors shall exercise their functions by resolutions adopted
at meetings of Shareholders and the Board of Directors.
Article 27
In the case that vacancies on the Board of Directors exceed, for
any reason, one third of the total number of the Directors, then
the Board of Directors shall convene a shareholders’ meeting to
elect new Directors to fill such vacancies in accordance with
relevant laws, rules and regulations. Except for the election of
new Directors across the board, the new Directors shall serve the
remaining term of the predecessors.
Article 28
The Board of Directors is authorized to determine the salary for
the Chairman, Vice Chairman and Directors, taking into account the
extent and value of the services provided for the management of the
Corporation and the standards of the
- 56 -
Article 29
The Corporation may, by resolution of the Board of Directors,
appoint one or more Chief Executive Officer, President(s), Vice
President(s) or such other officers to meet the Corporation’s
operational or managerial needs.
The Chief Executive Officer shall cause to be prepared and
furnished to the Board of Directors of the Corporation a balance
sheet of the Corporation and related statements of income and loss,
as of the end of each calendar month, quarter and year. Quarterly
statements shall be furnished no more than forty-five (45) days
after the end of each quarter, and year-end statements shall be
furnished no more than ninety (90) days after the end of each year.
Such financial statements shall be prepared in accordance with
generally accepted accounting principles applied in the Republic of
China on a consistent basis. Such statements shall be accompanied
by a certification of the Corporation that such statements have
been so prepared. Subject to the policies of the Corporation, the
officers as stated in the previous paragraph shall be responsible
for the overall control of allocated business and operation of the
Corporation and shall make reports to the Board of Directors, and
shall also supervise and control day-to- day business and operation
of the Corporation in accordance with the policies of the Board of
Directors headed by the Chairman. The Vice President-Finance shall
have special responsibility for the financial affairs and
accounting of the Corporation.
Article 30
The Chief Executive Officer reports to the Board of Directors. The
President(s), Vice President(s) and other officers shall perform
such duties as designated by the Chief Executive Officer or the
Board of Directors.
Article 31
Subject to the provisions of the Company Law of the Republic of
China and these Articles of Incorporation, all actions of the
Corporation’s employees shall be in conformance with, and in
furtherance of, the directions of the Board of Directors.
Section V - Financial Reports
Article 32
The fiscal year for the Corporation shall be from January 1 of each
year to
- 57 -
December 31 of the same year. After the close of each fiscal year,
the following reports shall be prepared by the Board of Directors,
and submitted to the regular shareholders’ meeting for
acceptance:
1. Business Report;
2. Financial Statements;
3. Proposal Concerning the Distribution of Earnings or Covering of
Losses.
Article 33
The distribution of earnings or the covering of losses may be made
on a quarterly basis after the close of each quarter. When the
earnings are to be distributed in cash, the distribution shall be
approved by the Board of Directors in accordance with Article 228-1
and Paragraph V of Article 240 of the Company Law and reported to
the shareholders’ meeting, instead of being submitted to the
shareholders’ meeting for acceptance.
The Corporation shall not pay dividends or bonuses to shareholders
when there are no earnings. When allocating the earnings, the
Corporation shall first estimate and reserve the taxes to be paid,
offset its losses, set aside a legal capital reserve at 10% of the
remaining earnings provided that the amount of accumulated legal
capital reserve has not reached the amount of the paid-in capital
of the Corporation, then set aside a special capital reserve in
accordance with relevant laws or regulations or as requested by the
authorities in charge.
Before paying dividends or bonuses to shareholders, the Corporation
shall set aside not more than 0.3% of its profits of the period for
which the Corporation distributes the earnings as compensation to
its directors and not less than 1% as profit sharing bonuses to its
employees; provided, however, that the Corporation shall have
reserved a sufficient amount to offset its accumulated losses.
Directors’ compensation is governed by the rules set by the Board
of Directors; directors who also serve as executive officers of the
Corporation are not entitled to receive compensation to directors.
Employees’ profit sharing bonuses are resolved by a majority vote
at a Board of Directors meeting attended by at least two-thirds of
the total number of directors and shall be reported to the
shareholders’ meeting. The Corporation may issue profit sharing
bonuses to employees of an affiliated company meeting the
conditions set by the Board of Directors or, by the person duly
authorized by the Board of Directors.
After the Corporation has set aside the capital reserves pursuant
to the second Paragraph of this Article, the balance left over
shall be allocated according to the applicable laws and
regulations, the relevant rules set forth herein, and the following
principles: Earnings may be distributed in total after taking into
consideration financial, business and operational factors. Earnings
of the
- 58 -
Corporation may be distributed by way of cash dividend and/or stock
dividend. Since the Corporation is in a capital-intensive industry
at the steady growth stage of its business, distribution of
earnings shall be made preferably by way of cash dividend.
Distribution of earnings may also be made by way of stock dividend,
provided however, the ratio for stock dividend shall not exceed 50%
of total distribution.
In case there are no earnings for distribution, or the earnings are
far less than the earnings actually distributed by the Corporation
previously, or considering the financial, business or operational
factors of the Corporation, the Corporation may allocate a portion
or all of its reserves for distribution in accordance with relevant
laws or regulations or the orders of the authorities in charge.
When the reserves are to be distributed in cash, the distribution
may be approved by the Board of Directors in accordance with
Article 241 of the Company Law and reported to the shareholders’
meeting, instead of being submitted to the shareholders’ meeting
for acceptance.
Section VI - Supplementary Provisions
Article 34
The internal organization of the Corporation and the detailed
procedures of business operation shall be determined by the Board
of Directors.
Article 35
In regard to all matters not provided for in these Articles of
Incorporation, the Company Law of the Republic of China shall
govern.
Article 36
These Articles of Incorporation are agreed to and signed on
December 10, 1986 by all the promoters of the Corporation, and the
first Amendment was approved by the shareholders’ meeting on April
28, 1987, the second Amendment on November 27, 1989, the third
Amendment on May 28, 1991, the fourth Amendment on May 18, 1993,
the fifth Amendment on January 28, 1994, the sixth Amendment on May
12, 1995, the seventh Amendment on April 8, 1996, the eighth
Amendment on May 13, 1997, the ninth Amendment on May 12, 1998, the
tenth Amendment on May 11, 1999, the eleventh Amendment on April
14, 2000, the twelfth Amendment on September 5, 2000, the
thirteenth Amendment on May 15, 2001, the fourteenth Amendment on
May 7, 2002, the fifteenth Amendment on June 3, 2003, the sixteenth
Amendment on December 21, 2004, the seventeenth Amendment on May
10, 2005, the eighteenth
- 59 -
Amendment on May 16, 2006, the nineteenth Amendment on May 7, 2007,
the twentieth Amendment on June 15, 2010, the twenty-first
Amendment on June 12, 2012, the twenty-second Amendment on June 7,
2016, the twenty-third Amendment on June 8, 2017, the twenty-fourth
Amendment on June 5, 2018, and the twenty-fifth Amendment on June
5, 2019.
- 60 -
Article 1
Unless otherwise provided in the Company Law or the Articles of
Incorporation of this Company, the directors of this Company shall
be elected in accordance with the rules specified herein.
Article 2
Election of directors of this Company shall be held at the
shareholders' meeting. This Company shall prepare ballots and note
the number of voting rights.
Article 3
In the election of directors of this Company, the names of voters
may be represented by shareholders’ numbers.
Article 4
This Company’s directors shall be elected by adopting the candidate
nomination system specified in Article 192-1 of the ROC Company
Law.
Article 5
In the election of directors of this Company, each share shall have
voting rights equivalent to the number of seats to be elected and
such voting rights can be combined to vote for one person or
divided to vote for several persons. The election of independent
directors and non-independent directors shall be held together;
provided, however, that the number of independent directors and
non-independent directors elected shall be calculated
separately.
Article 6
In the election of directors of this Company, candidates who
acquire more votes should win the seats of directors. If two or
more persons acquire the same number of votes and the number of
such persons exceeds the specified seats available, such persons
acquiring the same votes shall draw lots to decide who should win
the seats available, and the Chairman shall draw lots on behalf of
the candidate who is not present.
- 61 -
Article 7
At the beginning of the election, the Chairman shall appoint
several persons each to check and record the ballots. The persons
to check the ballots may be appointed from among the shareholders
present.
Article 8
The ballot box used for voting shall be prepared by this Company
and checked in public by the person to check the ballots before
voting.
Article 9
If the candidate is a shareholder of this Company, voters shall
fill in the “candidate” column the candidate’s name and
shareholder’s number, and the number of votes cast for such
candidate. If the candidate is not a shareholder of this Company,
voters shall fill in the “candidate” column the candidate’s name,
the candidate’s ID number, and the number of votes cast for such
candidate. If the candidate is a government agency or a legal
entity, the full name of the government agency or the legal entity
or the name(s) of their representative(s) should be filled in the
column.
Article 10
(1) Ballots not placed in the ballot box;
(2) Ballots not prepared by this Company;
(3) Blank ballots not completed by the voter;
(4) If the candidate is a shareholder of this Company, the name or
shareholder’s number of the candidate filled in the ballot
inconsistent with the shareholders’ register. If the candidate is